The Maryland Model (Part 3): Lessons Learned from Maryland’s Payment Models

Blog,Payment Modeling,Strategic Planning,Transformation

Maryland is the only state in the country that has a waiver from the Medicare Prospective Payment System (“PPS”) and related regulations. The waiver allows the State to manage its healthcare costs through the evolution and implementation of progressive healthcare payment models.  In January 2019, the Total Cost of Care model (“TCOC”) replaced the All-Payer Model (“APM”).  TCOC places squarely on the shoulders of the hospitals the onus of cost management and quality across the continuum of care.

Parts 1 and 2 of this series review the history of the Medicare waiver in Maryland, how the models work and the APM’s outcomes.  The APM outcomes reported in Part 2 demonstrate some success and progress, but don’t adequately reflect the struggles and challenges experienced by Maryland hospitals during those five years.  Any hospital or system considering similar payer strategies can learn from Maryland’s experience, by evaluating what can be implemented successfully in their community and understanding how future healthcare policy must change in order to support the provision of value-based care on a larger scale.

Challenges and Concerns

The single biggest challenge during the implementation of these payment models was, and still is, the misalignment between what hospitals are being asked to do and what the healthcare payment model is paying for.  Not unlike systems elsewhere still operating under PPS, this disconnect is painfully evident on multiple fronts as hospitals struggled to fund non-revenue producing infrastructure, build capacity and implement community-based programs.

Fee-for-Service vs Value-Based Care

In the early days of the APM, hospitals were incentivized to focus on value-based healthcare under a fixed revenue budget, while community-based practitioners were still working entirely under the fee-for-service compensation model.  At the most basic level, the incentives for hospitals and private practitioners were completely different.  This disconnect created tension between hospitals and physicians because they had different goals. It took a great deal of communication and education for physicians to understand the rules of the APM and how it affected hospitals and their mutual patients.

Medical staff practice patterns and culture evolved more quickly with the advent of accountable care organizations (ACOs) and clinically integrated networks. As Gonzalez-Smith et al note in the October 2019 issue of Health Affairs, there is an increasing number of ACOs accepting downside risk and more that are successfully producing savings.  This progressive alignment with hospitals, population health and value-based care moves everyone in the same direction under the same strategy.  Unfortunately, there are not enough ACOs or clinically integrated networks to have a significant impact on national trends.  The State of Maryland has attempted to expedite this alignment by offering care redesign programs—initiated under APM and continuing under TCOC—that incentivize community physicians to collaborate with acute care facilities in chronic disease management.

Strategy and payment alignment is not only important in the acute care setting, but throughout the entire continuum of care, especially under TCOC.  Maryland hospitals have begun to generate preferred provider networks for nursing homes, assisted living and home health partners.  They are working more closely with those who understand the goals of APM and TCOC.  These community care facilities are encouraged to focus on decreasing complications and readmissions, which complements the hospital and provider network strategies.

Non-Revenue Producing Investments

Maryland’s Medicare waiver models have focused on decreasing cost and improving quality, but not enough attention has been paid to financing non-revenue producing infrastructure investments that support the move towards population health.  Hospitals have increasing requirements for data sharing and analyses to support their initiatives, the majority of which are not supported directly by waiver monies.  Not unlike their counterparts in other states, healthcare entities in Maryland are investing in technology without knowing if they can clearly document a return on investment that justifies the expense.

Maryland has responded to the data sharing challenge at the statewide level by launching CRISP, the  Chesapeake Regional Information System for our Patients, a health information exchange. CRISP users have access to reports and analytics based on comprehensive, Maryland-wide Parts A, B and D Medicare claims.  These reports, which are additions to the case management and prescription drug monitoring programs, provide timely population-level data to all hospitals and patient-level data to state policymakers and hospitals participating in Maryland’s care redesign programs.

Non-Traditional Community Care Initiatives and Services

Despite payment uncertainties, many healthcare organizations have moved ahead in the last five years with innovative population health programs.  One such program is “CAPABLE”: Community Aging in Place – Advancing Better Living for Elders.  This program is a great example of a fresh approach to an identified need in the community.  It keeps seniors safely at home, where they prefer to be, while controlling attendant healthcare costs. Unfortunately, it is not yet supported by Medicare.  The program is currently under consideration for reimbursement.  In the meantime, the program is funded by a mosaic of payers, which include ACOs, state senior agencies, pilot program monies, home health agencies and non-profits in the healthcare and housing industries.

Other hospitals are taking on non-traditional roles to tackle population health issues without traditional reimbursement options.  For example, one Maryland hospital opened a dental clinic to serve adults who were either uninsured or underinsured.  Historically, this patient population would present to the Emergency Room with their non-emergent but costly dental complaints.  The clinic was subsidized by the hospital, grants and philanthropic gifts, and is staffed by volunteers and supervised dental students.  The clinic utilizes a sliding payment scale.  It has become a part of the system’s efforts to provide care in the right location for the right reasons at the right cost.  Since the clinic’s opening, emergency room visits for dental complaints have dropped significantly, yielding a ROI in the form of expense reduction.

Final Thoughts

As healthcare morphs into a system based on population health and value-based care, there will be an increasing emphasis on non-traditional solutions to complex patient problems.  The appropriate reforms to healthcare payment models must accompany this evolution if the innovations are to be encouraged and sustained.  Slow or absent payment reform by stakeholders will stifle the change and limit success, such as that experienced by Maryland healthcare providers under the waiver during the APM years. Simply put, if the emphasis in healthcare is on population health, value-based care and social risks, then the payment model must address the same activities in a timely fashion.

Payment reform truly is the key.  We need rational compensation models that advance innovation and community-based solutions to include community health workers, community paramedics, navigators, community clinics and home-based services.  Other novel programs being deployed include food pharmacies, transportation solutions and school educational interventions which are, again, not traditionally reimbursable.  Let’s not forget telehealth.  Policy reform, now accelerated by COVID-19, should consistently reimburse the use of technological solutions that can mitigate limited access to care, geographic challenges and provider shortages.  There is so much opportunity here.

If the rest of the nation is to follow in Maryland’s footsteps, payment policies will most certainly need to keep pace with these strategies and goals.  In the meantime, other states and their healthcare providers should review Maryland’s experience and work with their government officials, insurers and partners to find the right way to avoid the pitfalls and embrace the successes of the Maryland models.  The path may not be straight, but the importance of transforming to value-based and cost-effective quality care is quite clear.


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